Assess the factors within the business environment that impact upon operational management and decision making/Analyze how this different factor affect the businesses environment and wider community
There are a number of modern inventory control methodologies. However, there are still many organisations which have not adopted them. Discuss why this may be the case and how organisations can be persuaded to adopt modern inventory control methodologies. Provide examples of types of inventory control methods to be considered to support your argument.
State Automobile License Renewals Henry Croupe, the manager of a Boston-area branch of the Massachusetts Department of Motor Vehicles, attempted to perform an analysis of the driver’s license renewal process. Several tasks had to be performed in the process. He identified the tasks and associated times required to perform each task, as shown below in Exhibit 1.
Croupe found that each task was assigned to a different employee in the office. Each application was completed step by step in the sequence shown in Exhibit 1. He decided that his office should be able to service the maximum customer demand, which was 120 renewal applicants per hour.
Exhibit 1
State Automobile License Renewal Process Task Times
Step Average Time to Perform (seconds)
1. Review renewal 15
2. Process, record payment 30
3. Check for violations 60
4. Conduct eye test 40
5. Photograph applicant 20
6. Issue temporary license 30
Croupe saw that the work was unevenly divided among the clerks, and that the clerk who was responsible for checking violations tended to take shortcuts in order to keep up with the others. Long lines built up during the periods of highest volume in customer demand.
Coupe also noticed that Tasks 1, 2, 3, and 4 were handled by general clerks who were each paid $18.00 per hour (including benefits). Task 5 could only be done by a photographer, who cost the department $24.00 per hour (including benefits). Massachusetts state law required that Task 6 be handled completely by a uniformed Motor Vehicles officer, who was paid $27.00 per hour (including benefits). These officers could be assigned to any other task except Task 5, “Photograph Applicant”.
Croupe’s review of the jobs showed him that Task 1 had to be completed before any other tasks could be started. Similarly, Task 6 could not be started until every other task had been completed.
The branch office was charged an additional $30 per hour for each camera.
Henry Croupe was under severe pressure to increase productivity and reduce costs, but he was also told by his regional director of the Department of Motor Vehicles that he had better accommodate the demand for renewals. Otherwise, “heads would roll.”
Questions:
1. What is the maximum number of applicants per hour who can be handled by the process as it is currently designed?
2. How many applicants can be processed per hour if a second clerk is added to check for violations?
3. Assuming that after adding a second clerk for checking violations, a third clerk could be added to any of the tasks that clerks may do. What is the maximum number of applicants that the office could handle if a third clerk were added?
4. How would you suggest re-designing the process flow in order to accommodate 120 applicants per hour?
MT makes small camping and snowmobile trailers. The demand for camping trailers occurs between January and June (mostly in April and May). MT makes camping trailers from January to June, shuts down in July and then makes snowmobile trailers from August to November. Suppose now is the end of December. For simplicity, we consider every two months as a period. The forecasts for camping trailers during each of the next three periods (six months) are:
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MT employs 40 permanent workers who are paid an average of $20 per hour (including fringe benefits) and work approximately 320 hours a period (2 months). They make approximately 1,000 camping trailers per period during regular time. They can also work up to 50 percent more as overtime (i.e., up to 12 hours a day vs. the regular 8 hours a day) and will be paid 1.5 times the regular wage rate. Alternatively, MT can hire up to 40 additional temporary workers to work during a second shift. Hiring cost is $3,000 per temporary worker. Assume temporary workers’ wage rate and productivity are the same as permanent workers. Also assume that temporary workers work only during regular time (no overtime) and are kept for whole periods (i.e., for 2 months or 4 months). Inventory holding cost per camping trailer per period is $180 and is charged to average inventory level during each period. Currently there are no camping trailers on hand, and the desired inventory at the end of period 3 is zero (although a small positive number is also acceptable). MT wishes to meet the total demand, but shortage during a period (except last) is acceptable, in which case the shortage is assumed to be backordered at the cost of $600 per camping trailer per period.
a. Calculate all the relevant unit costs.
b. Suppose MT uses permanent workers during regular time and overtime. Determine the minimum cost plan in this case. Hint: Use overtime in each period.
c. Suppose MT hires temporary workers but decides not to use permanent workers during overtime (just regular time). Determine the minimum cost plan in this case. Hint: Hire 15 temps for two periods and 9 temps for 1 period starting in period 2.
d. Would overtime production by permanent workers and regular time production by temporary workers simultaneously result in a lower total cost? Complete a tradeoff analysis. What is the overall minimum cost plan?
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